With the current economic uncertainty showing no sign of ending any time soon, now could be a good time to consider fixing household expenses such as your savings, mortgage and energy tariffs.
But while this can offer great peace of mind, you do need to think carefully about how long to fix for.
David Black, from financial analysts Defaqto, says: “The big imponderable is what’s going to happen to the base rate.
"Given the state of the economy many economists don’t expect any increase from 0.5 per cent until 2014, but sentiment can change very quickly so there’s no real certainty.”
Locking up your savings
Savers have had little to shout about with the base rate frozen at an all-time low and inflation running high, as the combined effects have made it increasingly difficult for them to maintain the spending power of their cash.
If you’re looking to get returns that beat inflation and tax, locking up your cash is almost the only option.
The good news is that rates paid on fixed-rate savings accounts have increased on this time last year.
For example, the AA is currently paying 3.6 per cent on its one-year fixed-rate bond, while BM Savings is paying 4.05 per cent on its two-year bond.
These both have a minimum £1 deposit.
For those looking to fix for the longer term, Shawbrook Bank is dominating best buy tables with a three and a four-year fix at 4.45 per cent and a five-year fix at 4.8 per cent, all with a minimum deposit of £5,000.
How long should you fix for?
Only open a fixed-rate bond with money that you know you won’t need for the length of the term.
This is because early withdrawals tend to be expensive in terms of interest penalty, or not permitted at all.
“Also beware of locking your money away for too long, as you then risk missing out when rates do eventually go up,” says Black.
Choosing a fixed-rate mortgage
Despite a multitude of economists predicting the base rate will remain at its current rock-bottom level for many years to come, fixed-rate mortgages are now at their most popular for more than two years according to broker SPF Private Clients.
“With interest rates going nowhere, a discounted or tracker mortgage offers great value right now and is likely to for some time,” says Mark Harris from SPF.
“But people's concerns about the economy and the slowly imploding Eurozone mean that many are choosing the security of a fix.”
While fixed-rate mortgages do provide the benefit of certainty, they tend to charge a premium over the initial rate charged by base rate tracker mortgages over the same period.
Crucially, you are paying for the peace of mind of knowing what your monthly payments will be, as with a tracker there is the risk that the interest rate may increase if the base rate goes up.
How long should you fix for?
For those looking to fix, the danger of a taking a two-year fix right now is that you will need to remortgage just as rates move higher which could mean higher mortgage payments.
But five-year fixes are looking attractive at the moment.
“With gilt yields and swap rates [the price at which banks lend to each other] having fallen to new all-time lows, the cost of five-year deals has actually fallen over the last six months,” says Ray Boulger from broker John Charcol.
The Co-operative Bank currently has a five-year fix at 4.3 per cent and the Woolwich has a deal at 4.5 per cent.
A further option is a hybrid deal which combines a variable mortgage with a fixed-rate one.
Accord has a deal which charges a variable rate of base rate plus 1.99 per cent for two years, followed by a fixed rate of 3.59 per cent for the last three years.
Energy tariffs
As all of the major gas and electricity firms have announced reductions over the past few weeks, it's a good time to see if you could get a better deal by switching supplier.
“Energy prices have been extremely volatile of late, so we are recommending consumers opt for fixed or capped tariffs,” says Lisa Greenfield, energy analyst at Confused.com.
“As with opting for a fixed-rate mortgage, there is typically a premium.
"However, at present there is not much difference in cost between the best online variable tariff at £1,093, and the best fixed-rate tariff at £1,120.”
Crucially, signing up to a fixed-rate energy deal will guarantee you pay that price for the length of your plan.
How long should you fix for?
The new First Utility iSave Fixed Price v1 tariff offers the security of a fixed rate until March 2013 with no minimum contract period and no exit fees if you want to leave.
“If you feel rates will rise and can’t afford it, you should seriously consider fixing,” says Greenfield.
“First Utility’s tariff is an excellent option as it is a cheap rate and there are no tie-ins.”
At present, the cheapest fixed-rates are only set for around a year so you will pay more of a premium if you want to fix for longer.
“The longest fixed period currently available is Scottish Power’s Fixed Price January 2015 which has an annual bill of £1,214,” says Greenfield.
"But that’s more than £10 per month more than its cheapest fixed-rate deal.”
